Monday, May 3, 2010

Higher stocks on increased consumer spending in March

Dow climbed 85, advancers over decliners 2-1 & NAZ was up 19. Banks gained while the bill for increased regulation is out there.


% Change

The MLP index fell 1¼ to the 311s. MLPs are seeing a few worried investors selling over the confusion about the Gulf oil spill. Few MLPs, if any, are affected, but this news makes some nervous. The Dow Jones REIT jumped 4½ as it's trying to take out last 2010 high. Junk bond funds were higher, up to even loftier levels. The yield on the 10-year Treasury bond rose 3 basis points to 3.69%, still going sideways.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

Oil buyers are encouraged by the Gulf oil spill reducing oil supplies. The chart shows oil is up 5% since the enormity of the oil spill was recognized last week. Gold is running for its own reasons (nervous investors in Europe) & wants to challenge the highs reached late last year.

CLM10.NYM...Crude Oil Jun 10...86.68 ...Up 0.53

GCK10.CMX...Gold May 10...1,185.20 ...Up 5.10

OIL (ETF) --- 2 weeks

GLD (ETF) --- 6 months

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Photo: Bloomberg

Consumer spending rose 0.6% in Mar, the most in 5 months. Inflation-adjusted spending on durable goods, such as autos, furniture & other long-lasting items, jumped 3.4%, the most since Aug. Purchases of non-durable goods increased 0.4%, & spending on services, which account for almost 60% of all outlays, were little changed. Because spending rose faster than incomes, the savings rate declined to 2.7%, the lowest level in 1½ years.

Consumer Spending in U.S. Rose by Most in Five Months

Photo: Bloomberg

The Greek bailout if getting more confusing with no end in sight. Germany will be at the center of a rescue plan, but it's all politics now. The € is below $1.32, an interim low, indicating confusion reigns.

Merkel Makes Public Case for Germany to Aid Greece
ECB Comes to Greece’s Aid by Waving Collateral Rules
EU Bets $146 Billion Greek Bailout to Avert Contagion

Speaking of junk debt, risky companies sold $33.7B of junk bonds in Apr, a record for Apr. Borrowers are rushing to sell debt before investors pull back from the riskiest securities. Moody’s says sales of new junk bonds may rise 10% in 2010 while investment grade sales drop 7%. The extra yield to own junk bonds instead of Treasuries rose 6 basis points last week, but it's still at a very narrow 149 basis points, unchanged from the end of Mar & down from 176 basis points at the end of 2009.

EU Bets $146 Billion Greek Bailout to Avert Contagion

Nothing special going on in the markets. The chaos about bailing out Greek debt & the spreading oil spill are not bothering traders. The path of least resistance is to take the markets high.

Dow Jones Industrials --- 2 weeks

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